Analyst Conference Summary

biotechnology

conference date: April 25, 2018 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2018 (first quarter, Q1 2018)

Forward-looking statements

Overview: Continued rapid revenue growth, but still in the red as R&D spend increases. While it is making valuable medicines for patients, its stock price is way too high for me at this time.

Basic data (GAAP):

Revenue was $373.4 million, up 4% sequentially from $358.3 million, and up 23% from $303.7 million year-earlier.

Net income was negative $44.1 million, up sequentially from negative $51.4 million, but down from negative $16/3 million year-earlier.

Diluted EPS was negative $0.26, up sequentially from negative $0.30 and down from negative $0.09 year-earlier.

Guidance:

Reaffirmed prior guidance.

Conference Highlights:

Jean-Jacques Bienaimé, Chairman and CEO of BioMarin said, "2018 is a year of execution as we aim to achieve numerous value-creating catalysts across the business. In clinical development, we intend to complete enrollment of our global GENEr8–1 pivotal study with the only late-stage gene therapy product for the treatment of Hemophilia A, valoctocogene roxaparvovec. Concurrently, we continue to anticipate reaching roughly $1.5 billion in Total Revenues for the full-year 2018, per our guidance."

Non-GAAP net income was $21.3 million, up sequentially from $5.2 million, and down from $34.3 million year-earlier. Stock-based compensation excluded was $36.6 million.

Cash and equivalents ended at $1.70 billion, up sequentially from $1.78 billion. Long term convertible debt was $818 million, short term convertible debt $365 million. Plans to use cash to eliminate debt due in 2018.

Total operating costs (GAAP) were $417.8 million, consisting of: cost of sales $82.3 million, research and development $183.9 million, selling, general and administrative $138.3 million, and intangible amortization & contingent consideration of $13.2 million. Operating income was negative $44.4 million. Other expense net $6.5 million. Income taxes $6.7 million.

Jump in Aldurazyme revenue was due to a new accounting standard, moving forward revenue recognition of shipments to Genzyme. Affects timing, not total revenue over all time. Did continue to increase volume of sales. Total Aldurazyme revenue for the year expected to be $120 million.

"A gene therapy product will be the next IND (after BMN 290 for Friedreich's ataxia) candidate for the treatment of PKU in 2019. PKU is an autosomal recessive disorder in which phenylalanine hydroxylase, the enzyme that metabolizes the amino acid phenylalanine (Phe), is deficient. PKU leads to high levels of neurotoxic phenylalanine, which would affect neurocognitive development, if left untreated. In preclinical models, BioMarin's PKU gene therapy product candidate demonstrated sustained, normalized Phe levels without hypophenylalanemia in an ongoing study and out to 53 weeks at the last observation. The product candidate will be an AAV vector containing the DNA sequence that codes for the phenylalanine hydroxylase enzyme that is deficient in people with PKU."

Brineura (Cerliponase alfa) for CLN2, late-infantile form of Batten disease was approved by the FDA in April 2018. Because children with CLN2 die quickly, there is not a relatively large pool of diagnosed patients waiting. Expanding sales in Europe.

Pegvaliase for phenylketonuria (PKU) Phase 3 results met the primary endpoint. Biogen submitted a Biologics License Application (BLA) to U.S. FDA. A decision could be announced by PDUFA May 25, 2018. The EU application should be made in Q1 2018. Pricing could be at a modest increase over Kuvan. Believes could be a $1 billion product.

BMN 270 (Valoctocogene roxaparvovec, often "ValRox") gene therapy product for hemophilia A: interim results established proof of concept. Further data released in January were positive. Launched a Phase 3 study in December 2017.

BMN 250 for MPS IIIB (Sanfilippo Syndrome Type B) updated preliminary Phase 1/2 data released in February showed normalization of heparan sulfate biomarker. Newer patients are safely at 300 mg. Study will now move to the expansion phase.

Vosoritide for achondroplasia Phase 3 study continued, with complete enrollment anticipated in mid-2018. Primary endpoint is growth velocity in children. Demonstrated a sustained increase in annualized growth rate at 30 months of treatment in Phase 2. An infant (Age 0-5 years) study will begin next year. Top line data should be available in 2H 2019.

BMN 290 for Friedrich's Ataxia should have an IND submitted in the second half of 2018, followed by a Phase 1 trail initiation.

Anticipates a continuing flow of new drug candidates from the research organization.

Q&A:

[note this is a summary, not a transcript]

Disconnect in current valuation and pipeline value? We hear from investors we are growing into our market cap in the last couple of years. Investors may be underestimating the value of Pegvaliase, but of course we need to get an approval. We have a number of catalysts in the next few quarters. At analyst day we can talk about potential IND filings.

PKU Pegvaliase adoption curve if approved? Tolerability? Bullish because of clinical benefits, weighed against manageability of side effect issues. Doctors are eager to use it, upon approval. We are well connected to the doctor base. 200 or so patients could be transitioned to commercial product immediately, plus all the 32 clinics that worked on the trial. Could add another 30 clinics quickly. There are 33,000 patients, 12,000 in the U.S. We will charge above $150,000 per year. But it take four to six months to bring patients up to a full dose.

Not many PKU patients have adopted Kuvan. Believes many more will be used Pegvaliase. [WPM: PKU (Phenylketonuria) can usually be dealt with by diet, so why spend $150,000 per year on a drug? I guess the drug has less risk that diet, or diet does not work for some PKU patients.]

Hemophilia program? Now that Biomarin has shown can get above 5% range, physicians are not interested in products that are lower than that, even lower doses of our potential therapy BMN 270.

We believe at home use of pegvaliase, after the initial injections by physicians, will not be a problem.

Pegvaliase will be the first treatment that means the patients will not need to be on a medical food diet.

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